A PROJECT REPORT ON

To study the level of Non-Performing assets with reference to Nagpur district central co-operative bank, (Nagpur)
Submitted to: Rashtrasant Tukdoji Maharaj Nagpur University, Nagpur. In partial fulfillment of

Degree of Master of Business Administration For the academic year 2010-2012

Geographical Area: - Nagpur

SUBMITED BY:

Miss. Arshi Khan

Researcher (Enroll no.RTMNU/A8/2755) Under The Supervision of Internal Guide Prof. madhu menon G.H.R.C.E., Nagpur External Guide Mr. waghmare NDCC bank

DEPARTMENT OF MANAGEMENT STUDIES G. H. RAISONI COLLEGE OF ENGINEERING, NAGPUR (An Autonomous Institute Under UGC Act 1956 ) Digdoh Hills, CRPF Gate No. 3 , Hingana Road , Nagpur

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Declaration

CERTIFICATE
This is to certify that Miss. Arshi khan the students of MBA IInd year of G.H.Raisoni College of Engineering, Nagpur have completed their Grand Project To study the level of Non-performing assets with reference to NDCC bank in the year 2010-2012 in partial fulfillment of Nagpur University requirements for the award of the degree of Master of Business Administration.

(HOD) Dr.K.S.Mukherjee Director Dr. Preeti Bajaj G.H.Raisoni College of Engineering

PROJECT GUIDE Prof.Madhu Menon

Declaration
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I hereby declare that the project report entitled To study the level of nonperforming assets with reference to Nagpur district central co-operative bank, Nagpur or any part thereof has not been submitted earlier to any institution or university for the award of any other diploma or degree, nor the data has been derived from any thesis of any university. The source of material & data used in this study have been duly acknowledged.

Place : Nagpur Date:

Acknowledgement
Page14 The study is the outcome of the support, guidance and co-operation of several person to whom owe my sincere gratitude. First and foremost I would like to express my deepest gratitude to the project guide Prof. Madhu Menon for valuable guidance and constant encouragement in conducting the study and completing the work. I am privileged to extend my sincere thanks to Dr. Kaustubh Mukhrjee, head of department for his inspiration and guidance rendered to members for necessary support and information. The study would be impossible if the respondents employee had not contributed their valuable information. I acknowledge and thank the entire respondents for their valuable contribution. I thank god for giving me good health and motivation and my family who is source of all my inspiration and strength in completing the work. Lastly, I express a word of gratitude to one and all that helped me in one other way to complete my study.

ARSHI KHAN GHRCE, NAGPUR

INDEX
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SR. NO.

TITLE

PAGE.N O

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19.

Executive summary Company profile Significance of study What is bank and banking? What is RBI? Co-operative banks in India Objective of the study Introduction of NPA Guidelines for classification of NPA Management of NPA Importance of recovery of NPA Steps taken by govt. for recovering NPA Research and methodology Data collection Scope of study Benefits of study Limitations of study Credit appraisal policy at NDCC bank NPA norms of NDCCB

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Executive summary

EXECUTIVE SUMMARY
Page14 A project has been prepared under the title of To study the level of Non Performing Assets with reference to NDCC bank, nagpur. First of all the information regarding the co-operative banking is given. In that various facts regarding the co-operative bank is being provided.after that the structure f bank is given. Also the various types of non performing assets. The brief introduction of non performing assets is given. Then the objective of doing the project is mentioned. In this the definition Then Various benefits, objective, limitation etc. Regarding NPA are mentioned. Then a analysis of data is made. After that analysis comes. At the last me find Conclusion & Suggestion. In this part first of all the details about the non performing assets by me is given.

INTRODUCTION OF PROJECT :

My objective of study is to research about the financial analysis of non performing assets and to understand the performing assets and non performing assets and to detect the discrepancies of existing recovery process of Nagpur District Central CoOperative Bank. In order to minimize the events of defaults that lead to non performing assets. As an investor (depositors) or creditors point of view NPA of any co-operative, nationalized or private bank is an important thing in study of the financial position of a bank. If NPA is greater than the PA, then it would create a problem or can cause failure of a bank in near future. So from a safety point of view it is very necessary to study NPA of any bank. I selected to do research about the financial analysis of NDCC BANK in which my main focus is an NPA of the bank because from last ten years, a no. of co-operative banks are being failure due to high NPA ratios. So it is very important for success of any bank to maintain PA and having less or zero NPA.

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SIGNIFICANCE OF THE STUDY:Co-operative banks play very important role in providing banking services to common man in their area of co-operation. A small depositor or a small borrower feels comfortable in dealing with the local staff of co operative bank than to the staff of nationalized banks and private sector banks. If co-operative banks go in liquidation due to abnormal increase of NPA not only customers and staff members of that particular co-operative bank will suffer but all other co-operative banks will also get a major setback. Leading to severe damage to the reputation of entire co-operative sector which is very important for the balance of economic development of our country. Banking is the life blood of Indian economy. Banking has three types of sectors, which provide finance to different sectors i.e. private sector, public sector and cooperative sector. The co-operative banking sector in India plays an important role in expanding rural economy as well as banking structure and its services to the last man of the society. The co-operative banking structure has developed very fast in India but still it lags in so many things like ideal liquidity position due to NPA of customer as well as staff, modernization of banking structure etc. The NPA impact on the performance of the bank in which it reduces its interest income, the net worth of the bank, demoralized the staff, hardens Capital Risk Adequacy Ratio which also restricts recycling of fund and hinders the desirable yield. Looking to the situation of banks it is desirable to take effective measures to reduce the NPAs as low as possible. Not only reduction but up gradation of quality of

such assets would also be desirable for improvement. Managing these Non performing assets is required in order to protect the interest of Shareholders, depositors as well as increase the credit worthiness of bank. It is also advisable to increase the profitability by making the provision as well as expansion plan. NPA should be reduced for sustaining the economic growth, to increase the welfare of employees, to maintain reputation of the banks as well as to create job opportunities for future generation.

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CHAPTER: 1
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INTRODUCTION OF NDCC BANK

INTRODUCTION OF NDCC BANK:

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NDCC bank stands for Nagpur district central co-operative bank. The NDCC
bank was started in 1911. And has successfully completed its 100 years of century in 2010.NDCC bank have total 86 branches. NDCC Bank has total 554 no. of employee working in its banks. In April 2002, because of serious scam, as per Maharashtra sahakari sanstha provision of 1960 act (a)(3), the director committee was suspended, in may 2002, thereon there is a On 27-07-2009 Mr. S.N Kadam was appointed as district deputy administrator at shakari sanstha, Nagpur, he is currently looking after the banking management and administration. Because of that scam the bank has to suffer a loss of 121.11 crore in 2002-2003, due to this the net worth of bank had decreased badly and the bank came under the B.R act of 1949 under 11[1]. Under the supervision and guidance of Mr. S.N Kadam, the administration and employee unit worked tough and hard. In 2006-2007 without taking any financial help from anyone they have started getting profit in their banking transactions. It helped in improving the financial position of NDCC bank. At that time, the bank by fulfilling all the needs of finance to the farmer as well as to other customers has made goodwill and a positive mark of a NDCC bank in their customers mind.

BRANCHES OF NDCC BANK

DISTRICT BRANCH NAME 1. Main branch 2. Mahal 3. Ganeshpeth 4. Dhanyaganj 5. Panchpaoli 6. Hanuman nagar 7. Ram nagar 8. Dhantoli 9. Zilla parishad 10.Gandhi bagh 11.Kalamna market 12.Jaripatka 13.Shakkardara 14.Takli 15.Fetri 16.Vaai 17.Hudkeshwar 18.Kamthi 19.Butibori 20.Peth 21.Vihirgaon 22.Vadoda 23.Dighori station 24.Koradi 25.Kanholi bara 26.Hingna 27.Gumgaon 28.Kaodas 29.Takadgath 30.Mohgaon zilpi 31.Adegaon 32.Ramtek 33.Paoni 34.Devlapar 35.Mansar 36.Parsivni 37.Kanhan 38.Nave gaon khairi 39.Maoda 40.Tarsa 41.Aroli 42.Khaat

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NAGPUR

KAMTHI

RAMTEK

PARSIVNI MAODA

KATOL

NARKHED

SAONER

KALMESHWAR

UMRED

BHEWAPUR

KUHI

43.Dhanla 44.Marodi 45.Chacher 46.Revrad 47.Katol 48.Kondhali 49.Reghora 50.Yenwa 51.Paradsinga 52.Metpanjra 53.Murti 54.Narkhed 55.Mohad 56.Jalalkheda 57.Savargaon 58.Pipla 59.Lohari saonga 60.Thadi paoni 61.Belona 62.Mendhala 63.Saoner 64.Patansaongi 65.Khapa 66.Bade gaon 67.Kelvad 68.Nandagomukh 69.Khaperkheda 70.Kalmeshwar 71.Mohpa 72.Dhapewada 73.Kohli 74.Umred 75.Sirsi 76.Bela 77.Panch gaon 78.Makardhokda 79.Bamni 80.Shedeshwar 81.Bhewapur 82.Nand 83.Javdi 84.Besur 85.Kuhi 86.Beltur 87.Mandhar 88.ghothangaon

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Organization structure

DEFINITION OF BANK

An organization, usually a corporation, chartered by a state or federal government, which does most or all of the following: receives demand deposits and time deposits, honors instruments drawn on them, and pays interest on them; discounts notes, makes loans, and invests in securities; collects checks, drafts, and notes; certifies depositor's checks; and issues drafts and cashier's checks.

DEFINITION OF BANKING
In general terms, The business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit So we can say that Banking is a company, which transacts the business of banking. The Banking Regulations Acts defines the business as banking by stating the essential function of a banker. The term banking is defined as Accepting for the purpose of leading or investment, deposits of money from the public, repayable on demand or otherwise and withdrawal by cheque, draft, order or otherwise.

HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the

country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks. Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991To make this write-up more explanatory, we divide scenario in Phase I, Phase II and Phase III

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PHASE I

The General Bank of India was set up in the year 1786. Next were Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later

changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. Page14 PHASE II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then City Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: 1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

PHASE III Page14 This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

RESERVE BANK OF INDIA (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the beginning. The Government held shares of nominal value of Rs. 2, 20,000 Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following: To regulate the issue of banknotes to maintain reserves with a view to securing monetary stability and

To operate the credit and currency system of the country to its advantage

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RBIS REGULATION TO NPA:In order to ensure transparency in the borrowers accounts and to reflect actual health of banks in their balance sheets RBI introduced regulations relating to NPA, the most important 4 aspects are as follows: a) Suspended Interest Account: it means an account where previously accrued but uncollected interest or loans or advances required placing on non-accrual status is reserved out of income of the bank. A separate account is opened in the name of suspended interest account, the uncollected interest amount transfer to this account. b) Classification Of Loan Or Advances:As per the RBIS directive, bank should classify all loans and advances in the following categories: 1. Standard: These are loans which do not have any problem and less risky. 2. Substandard : These are assets which comes under the category of NPA for a period of less than 12 month 3. Doubtful: These are NPA which are exceeding 12 months 4. Loss: These are the NPA which are identified as unreliable by internal inspector of bank or auditor or by RBI.

CO-OPERATIVE BANKS
The Co operative banks in India started functioning almost 100 years ago. The Cooperative bank is an important constituent of the Indian Financial System, judging by the role assigned to co operative, the expectations the co operative is supposed to fulfill,

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their number, and the number of offices the cooperative bank operate. Though the co operative movement originated in the West, but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. The cooperative banks in India play an important role even today in rural financing. The business of cooperative bank in the urban areas also has increased phenomenally in recent years due to the sharp increase in the number of primary co-operative banks. Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

Co-operative banks in india

In India, there is a plethora of banks providing almost all services that an individual requires. But most of the banks that people use are either private (which makes up a major chunk of the numbers) or nationalized banks. However, there is another sector of banks that is used by a large number of the middle class sections of the society --co-operative banks. Co-operative banks are small-sized units organized in the co-operative sector which operate both in urban and non-urban centers. These banks are traditionally centered around communities, localities and work place groups and they essentially lend to small borrowers and businesses. The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These banks, until 1996, could only lend for non-agricultural purposes. However, today this limitation is no longer prevalent. While the co-operative banks in rural areas mainly finance agricultural based activities including farming, cattle, milk, hatchery, personal finance, et cetera, along with some small scale industries and selfemployment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small scale units and home finance. Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. These banks provide most services such as savings and current accounts, safe deposit lockers, loan or mortgages to private and business customers. For middle class users, for whom a bank is where they can save their money, facilities like Internet banking or phone banking is not very important. The co-operative banking structure in India is divided into following main 5 categories: Primary Urban Co-op Banks Primary Agricultural Credit Societies

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District Central Co-op Banks State Co-operative Banks Land Development Banks

Co-operative banks function on the basis of 'no-profit no-loss'. Co-operative banks, as a principle, do not pursue the goal of profit maximization. Therefore, these banks do not focus on offering more than the basic banking services. So, co-operative banks finance small borrowers in industrial and trade sectors, besides professional and salary classes. Some cooperative banks in India are more forward than many of the state and private sector banks. According to NAFCUB (National Federation of Urban Co-operative Banks and Credit Societies Ltd), the total deposits and lending of cooperative banks in India is much more than old private sector banks and also some new public sector banks. This exponential growth of co-operative banks in India is attributed mainly to their much better local reach, personal interaction with customers, and their ability to catch the nerve of the local clientele. Although they are not better than private banks in terms of facilities provided, their interest rates are definitely competitive. For example, the interest rates on auto loans are anywhere less than 5%-7% than that offered by private banks. However, unlike private banks, the documentation process is lengthy if not stringent and getting a loan approved quickly is rather difficult. The criteria for getting a loan from a UCB are less stringent than for a loan from a commercial bank. For instance, when taking an education loan, it does not matter whether the course you are going for is recognized or not. So, it makes better sense to bank with UCBs today, what with the rates some offer being the best in the industry. And with the risk of a run minimized, they are almost on an equal footing with commercial banks when it comes to vying for your attention. However, to get a loan, you have to be a member of the SCB: own its shares worth at least 2.5 per cent of the loan amount, or a maximum of Rs. 25,000. This amount earns a return of 12-20 per cent. A word of caution: Only approach those co-operative banks which have a good history. Since, a lot of co-operative banks have political interests, providing social help is not one of their priorities sometimes. .

FACTS ABOUT CO-OPERATIVE BANK:

Some cooperative banks in India are more forward than many of the state and private sector banks. According to NAFCUB the total deposits & lendings of Cooperative Banks in India is much more than Old Private Sector Banks & also the New Private Sector Banks.

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This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach, personal interaction with customers, their ability to catch the nerve of the local clientele.

Co-Operative Bank Finance in Rural Area As Under:

Co-Operative Banks Finance in Urban Area As Under:

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Objective Of The Study:The present study To study the level of non-performing assets with reference to NDCC bank. has been initiated to fulfill certain objectives which are as follows: Main objective: To study the NPA characteristics and effect on the financial position of the banks.

Secondary objective:1. To study %tage of non-performing assets in NDCC bank.

2. To find out the reason of High level of NPA. Page14 3. To Study the steps taken to reduce the level of NPA. 4. To study the credit appraisal procedure of the bank. 5. To study and understand the concept of NPA 6. To analyze the banks policy to recover the level of NPA 7. To understand the effect of NPA on banks profit and its prestige 8. To understand how corrective measures taken by bank for NPA 9. To understand RBIS rules and regulations for the control of NPA

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CHAPTER INTRODUCTION OF NON-PERFORMING ASSETS

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Introduction Of The Topic:NON-PERFORMING ASSETS

Non-performing assets also called as non-performing loans are loans, made by a bank or a finance company, on which repayment or interest payment are not being made on time. An asset which ceases to generate income of the bank is called non-performing assets. An asset becomes non-performing when it ceases to generate income for the bank. Earlier an asset was considered as non performing asset based on the concept of past due. DEFINITION A NPA was defined as credit in respect of which interest and/or installment of principal has remained past due for a specific period of time. The specific period of time was reduced in a phased manner as under: Year ended March,31 Specific Period 1997-4 Quarters 1998-3 Quarters 1999-2 Quarters 20010-1 Quarters An amount is considered as past due, when it remains outstanding for 30 days beyond the due date. However, with effect from March31, 2001 the past due concept has been dispensed with and the period is reckoned from the due date of payment.

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Norms For Identification of NPA:

With an intense to use the international best practice and to ensure greater transparency, 90 days overdue norms are accepted for the identification of NPA from the year ended March 31, 2004. With effect from March 31, 2004, a NPA shall be counted on loan and advances where: A. Interest and / or installment of principal remain overdue for a period of more than 90 days in respect of a term loan. B. The account remains out of order for a period of 90 days, in respect of an Overdraft/ Cash Credit (OD/CC). C. The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted. D. Any amount to be received remains overdue for a period of more than 90 days in respect of any other accounts. Tier 2 bank like all the Urban Co-Operative Banks (UCBs) other than the Tier 1 bank i.e. Unit bank shall classify their loan accounts as NPA as per 90 day norm as hitherto.

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DEFINITION AS PER THE CLASSIFICATION OF ASSETS:

Reserve Bank of India (RBI) has issued guidelines on provisioning requirement with respect to bank advances. In terms of these guidelines, bank advances are mainly classified in to following categories:

1. STANDARD ASSETS: Page14 Standard assets are one which does not carry any problems and which does not carry more than normal risk attached to the business. Such assets should not be an NPA.

2. SUB-STANDARD ASSETS: These assets involved the two types of view as follows In respect to the norms of March 31, 2005 an asset would be classified as Sub standard if it remained NPA for a period less than or equal to 12 months. An assets where the terms of the loan agreement regarding interest & principal have been regenerated or rescheduled after commencement of production, should be classified as sub-standard and should remain in such category for at least 12 months of satisfactory performance under the re-negotiated terms.

3. DOUBTFUL ASSETS: In respect to the norms of March 31, 2005 an asset is required to be classified as doubtful, if it has remained NPA for more than 12 months. A loan which is classified as doubtful has all the weaknesses inherent as that classified as Sub-standard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently known facts, conditions and values, highly questionable and improbable. Some types of these assets are A. Less than 1 year B. 1 to 3 year C. 3 year and above 4. LOSS ASSETS A loss asset is one where loss has been identified by the bank or internal or external auditors or by the Co-operation department or by the RBI inspection but the amount has not been written of, wholly or partly.

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READY RECKONER FOR ASSET CLASSIFICATION

Page14 NO. WHEN DATE OF NPA FALLS? ASSET CLASSIFICATION AS ON 31-3-2011 Sub-standard assets Doubtful up to 1 year Doubtful asset of more than 3 year Doubtful assets of more than 3 years Loss assets

1 2 3

Between 1-10-2010 & 31-3-2011 Between 1-10-2009 & 31-3-2010 Between 1-10-2007 & 31-3-2006

On or before 30-09-2007

5 6

No NPA date No security or salvage value security is less than 5% Chance of realization of dues from all available sources is practically negligible or zero Account has been identified by the bank or internal/external auditor of RBI inspector as loss an asset, which has not been written off.

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GUIDELINES FOR CLASSIFICATION OF ASSETS

The guidelines are as follows

1. BASIC CONSIDERATION: In simple terms the classification of assets should be done by considering the well defined credit weaknesses & extent of dependence on collateral security for realization of dues. In accounts where there is a potential threat to recovery on account and existence of other factor such as fraud committed by borrowers it will not be prudent for bank to classify that account first as sub-standard and then as doubtful. Such account should be straight away classified as doubtful asset or loss asset, as appropriate, irrespective of the period for which it has remained as NPA.

2. ADVANCES GRANTED UNDER REHABILITATION PACKAGES: Banks are not permitted to do classification of any advances in respect of which the term have been re-negotiated unless the package of re-negotiated terms has worked satisfactory for a period of one year. A similar relaxation is also made in respect of SSI units which are identified as sick by banks themselves and where rehabilitation packages programs have been drawn by the banks themselves or under consortium arrangements.

3. INTERNAL SYSTEM FOR CLASSIFICATION OF ASSETS AS NPA: Banks should establish appropriate internal systems to eliminate the tendency to delay or postpone the identification of NPAs, especially in respect of high value accounts. The banks may fix a minimum cut-off point to decide what would constitute a high value account depending upon their respective business levels. The cut-off point should be valid

for the entire accounting year. Responsibility and validation level for proper assets classification may be fixed by bank. Page14 The system should ensure that doubts in asset classification due to any reason are settled through specified internal channels with in one month from the date on which the account would have been classified as NPA as per extant guidelines.

INCOME RECOGNITION POLICY

According to the act of 1st April, 1992 the income recognition policy is as follows The policy of income recognition has to be objective and based on the record of recovery. Income from non-performing assets is not recognized on accrual basis but is booked as income only when it is actually received. Therefore, banks should not take to income account interest on non-performing assets on accrual basis. However, interest on advances against term deposits, NSCs, IVPs, KVPs, and Life policies may be taken to income account on the due date, provided adequate margin is available in the accounts. Fees and commissions earned by the banks as a result of re-negotiations or rescheduling of outstanding debt should be recognized on an accrual basis over the period of time covered by the re-negotiated or rescheduled extension of credit. If Government guaranteed advances becomes overdue and there by NPA, the interest on such advances should not be taken to income account unless the interest has been realized.

PROVISIONING NORMS
According to the norms the provisions should be made on the non-performing assets on the basis of classification of assets as we have already discussed. Taking in to account this provisioning norms the banks have to make provision on different assets like Loss Assets, Doubtful Assets and Standard Assets as below :->

( | ). LOSS ASSETS

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The entire assets should be written off after obtaining necessary approval from the competent authority and as per the provisions act of co-operative society Act. If the assets are permitted to remain in the books for any reason, 100% of the outstanding should be provided for. If expected salvage value of the loss asset is negligible then 100% provision should be made on it.

( || ). SUB-STANDARD ASSETS A general provision of 10% on the total outstanding should be made on the advances given. ( ||| ). DOUBTFUL ASSETS On doubtful assets provision is made from 20% to 100% as per the period of asset. The table below shows the provision on doubtful assets. Period for which the advance has Provision Requirement remained in doubtful category Up to one year 20% One to Three year 30% - 50% as on March 31, 2007 More than Three year - 60% as on March 31, 2008 ( | ) Outstanding NPA as on March 31,2007 - 75% as on March 31, 2009 - 100% as on March 31, 2010 ( || ) Advances classified as doubtful for more than three years on or after April1, -100% 2007

( |V ). STANDARD ASSETS

From the year ended March 31, 2000, the banks should make a general provision of a minimum of 0.25% on the standard assets. However, Tier 2 banks are required to do higher provisioning on standard assets as under:A. General provisioning requirement is 0.40% from the present level of 0.25%. But incase of agriculture or in SME investors the provisioning rate is required to be 0.25%.

( V| ). HIGHER PROVISIONS There is no objection if the banks create bad and doubtful debts reserve beyond the specified limits on their own or if provided in the respective State Co-operative Societies Acts.

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MANAGEMENT OF NPA
It is very necessary for bank to keep the level of NPA as low as possible. Because NPA is one kind of obstacle in the success of bank so, for that the management of NPA in bank is necessary. And this management can be done by following way: 1.Framing reasonably well documented loan policy and rules. 2. Sound credit appraisal on well-settled banking norms. 3. Emphasizing reduction in Gross NPAs rather then Net NPAs 4. Pasting of sale notice/ wall posters on the house pledged as security. 5. Recovery effort starts from the month of default itself. Prompt legal action should be taken. 6. Position of overdue accounts is reviewed on a weekly basis to arrest slippage of fresh account to NPA. 7. Half yearly balance confirmation certificates are obtained from the borrowers regularly. 8. A committee is constituted at Head Office, to review irregular accounts. 9. Due to lower credit risk and consequent higher profitability, greater encouragement is given to small borrowers. 10. Recovery competition system is extended among the staff members. The recovering highest amount is felicitated.

11. Adopting the system of market intelligence for deciding the credibility of the borrowers 12. Creation of a separate Recovery Department with Special Recovery Officer appointed by the RCS

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RECOVERY OF NPA IMPORTANCE OF RECOVERY:

1. Increase in the income of bank. 2. Increase in the trust of share holder in bank. 3. Level of NPA reduces as the recovery done. 4. Decrease in provisioning requirements.

Steps Taken By Government For Recovering NPA:

1. SECURITIZATION ACT ---- Now this act is also applicable to all Urban Co-Operative Banks. According to this act Bank can take direct possession of the movable and immovable property mortgages against loans and sell out the same for such recovery, without depending on legal process in the court. 2. Maharashtra state has also by amending under co-op soc, act empower co-op bank to appoint their staff as recovery officer on getting order from the board of nominees. Above both act are benefited to bank for the recovery of NPA.

Research Design:. Here the research design is exploratory which helps me to explore the NPA problem of bank.

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Research Methodology:
Research is a one kind of process to get knowledge about some topic. Research is done so that systematic analysis can be done and problem can also be solved.

Research Instrument:
As a research instrument I have taken guidance from the of NDCC bank and also my faculty of college.

Research Problem:
NPA always affect the profit of bank and also the prestige of bank. So here the research problem is to identify the causes for the NPA and to identify the action plan to reduce the NPA.

Source of Data Collection:-

The study focuses on entire condition of non performing assets of NDCC bank. As its an exploratory type of Research, there is no dependence on primary data. Secondary Sources: Secondary data are taken from

Annual reports (Balance Sheets, Profit & Loss Accounts) of the NDCC bank, Internal circulated matter from RBI, RBIS guidelines, Trend & Progress reports of RBI, Co-operative journals, Co-operative diary and from the web sites available on net.

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SCOPE OF THE STUDY: The study is mostly related to Personal and business loans provided by the NDCC bank. This study enables to improve knowledge about the banking sector, specifically on account of NPAs. This study also enables the banks to know its actual position on NPA management in last three years.

Limitations of the study:The following are the major limitations of the present study: a) Since the primary data & secondary data used in this work are collected from the personnel of NDCC bank and published annual reports of respective bank respectively, they have inherited limitations. b) The limitations of tools and techniques applied for the analysis are inherent in the present study. d) lack of information otherwise useful for a deeper study, due to the RBI restrictions on disclosure of data on part of higher officials. In spite of all these limitations this study throws light on the important challenging problems of the NDCC bank.

BENEFITS FROM THE STUDY

It helps me to know more about NPA and the situation of NPA in bank. It helps me to know the strategies adopted by banks to reduce the NPA level and to understand the NPA provisions norms in bank.

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CHAPTER

NAGPUR DISTRICT CENTRAL CO. BANK & NON-PERFORMING ASSETS

CREDIT APPRAISAL POLICY AT NDCC BANK

Page14 INTRODUCTION At the time of registration of bank, Loan rules were framed and approved by the NDCC bank ,nagpur. Thereafter with the approval of Board, loan rules were changed considering guidelines issued by RBI from time to time. Now in view to increasing branch network in numbers of geographically also, one common document viz. Appraisal policy is framed. POLICY ON PRE-SANCTION 1. Application for loan should be in standardized form as devised by the bank. 2. Branch to collect all the papers/information/documents as suggested in the respective application form. 3. Branch to visit the borrowers office/factory/residence and to satisfy themselves before recommending any loan to higher authority and to keep record of such visit. 4. If applicant maintains loan/current/saving account with any other bank/financial institutions, branch to verify such account statement and to satisfy them. 5. Branch to ascertain the promptness of applicant in making payment of Power bill/Property Tax/LIC Premium/Existing loan interest or installment, before recommending the proposal to higher authority.

APPRAISAL
A. WORKING CAPITAL FACILITY 1. Working capital requirement to be assessed properly considering past performance, holding period for debtors as also for inventory at various level, sales, etc 2. Working capital facilities beyond Rs. 5 lacs should not be considered in the form of overdraft.

3. Margin for CC against stock be 30% and for receivables 50%. Page14 B. TERM FINANCE 1. Term loan limit to be arrived @ 25% margin in respect of Machinery/Equipment and Vehicles while 50% against land & building, electrification, furniture fixtures. 2. Sources for margin money to be ascertained. 3. Repayment capacity, considering existing earning to be ascertained. 4. Moratorium period to be fixed considering time required going in for commercial production.

C. GENERAL 1. Credit facilities should not exceed segment wise, individual as also group exposures. 2. In case of switch over from other bank, branch to obtain credit information report from the concerned bank. 3. In case of existing borrower/group borrower, branch to satisfy themselves about their dealing with the bank.

EXPOSURE
As per the RBI guidelines per party exposure is restricted to 15% of share capital and Free Reserves and group exposures it is 40%. RBI has given liberty to recalculate the exposure on the basis of profitability of September half. However irrespective of these it is restricted at lower level i.e. Rs.1.55 crore for individual and Rs.3.50 crores for group.

#SANCTIONING AUTHORITY

1. AGM Page14 Rs.1.00 lac for all types of fresh loan except staff loan and Rs.2.00 lacs for renewal 2. CEO Rs.2.00 lacs for all types of fresh loan except staff housing loan and Rs.4.00 lacs for renewal 3. COE Committee of executives comprising of all the executives shall have authority to grant all type of fresh loan up to Rs.15.00 lacs except loan against FDR/LIC/GOVT. security and staff housing loan as also renewal of all working capital facilities irrespective of limit. 4. Chairman/Vice Chairman/Founder Chairman Loan against FDR/LIC/GOVT. security and any adhoc request. 5. LOAN COMMITTEE All types of loans to single borrower up to Rs.77.50 lacs and Rs.1.75 crores for group borrower. 6. BOARD All types of loan within exposure ceiling for individual and group borrower.

# DISBURSAL FORMALITIES
A. WORKING CAPITAL FACILITY 1. Fresh/additional limit against stock to be released only after party obtains adequate insurance for stock and submit stock/book debts statement. 2. In case of new unit, working capital facility to be released, only after the unit starts commercial production.

B. TERM FINANCE Page14 1. So far as possible, disbursement to be made by direct payment to seller. 2. At every time of disbursement, matching contribution to be made by the borrower. 3. Immediately after disbursement, branch to follow up insurance policy, receipt for payment made, invoice etc

C. GENERAL 1. Disbursement to be made only after complying with all the terms and conditions of sanction, complete documentation and obtaining disbursal authority. 2. In case of Private Ltd. Company, charge with ROC to be registered immediately on disbursal of credit facility. 3. Before disbursal branch to ensure that borrowers/guarantors become member of the bank.

POST SANCTION
A. TERM FINANCE 1. On installation of machineries branch to inspect the unit and to ensure that machineries as per sanction is received & place the inspection report on record. 2. At least twice a year, branch to inspect the unit to ensure that machineries financed by the bank are in running condition.

B. WORKING CAPITAL

1. No finance to be considered against inter-firm receivable and for the receivables of more than 90 days. Page14 2. Drawing power to be arrived at regularly every month on the basis of stock statement/book debt statement submitted by the party. 3. Branch to ensure that receipt and payment through CC/OD accounts represent genuine business transactions. 4. Branch to carry out inspection of the unit at least on quarterly basis.

Renewal of working capital facility

1. Personal balance sheet of proprietor/partner/directors is also to be obtained. 2. Branch to submit the renewal papers along with memorandum for renewal to higher authority for renewal, with its comments on performance with the bank, financial performance viz. sales, profit etc 3. If financial performance does not justify the limit at current level, branch to persuade the party to reduce the limit. 4. Where the accounts are statutorily required to be audited, branch to obtain audited accounts at the time of renewal.

Npa Norms Of NDCC Bank

CLASSIFICATION:

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Doubtful Asset-Categories

NORMS Overdue above 3 years and upto 4 years

CATEGORY D1

Overdue over 4 years, but not exceeding 6 years D2 Overdue exceeding 6 years D3

Loss Asset:
Loss assets are those assets (loans) o Which as considered as unrealizable

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They include overdue loans in cases o Where decrees or execution petition have been time barred o Where document are lost o Where no other legal proof is available to claim the debt Loss assets are those assets: Where the members and their sureties are declared as insolvent or have died leaving no tangible assets. Where the members have left the area of operation of the society, leaving no property and their sureties have also no means to pay dues. Where the loan is fictitious. Where amount cannot be recovered (as in case of liquidated society).

PROVISIONING NORMS:

Asset category

Standard assets Substandard assets Doubtful- unsecured Doubtful-secured-D1 Doubtful-secured-D2 Doubtful-secured-D3 Loss assets

Provision to be made (% of outstanding in particular category) 0.25% 10.00% 100.00% 20.00% 30.00% 50.00% 100.00%

Loans exempted from NPA:

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Advances granted againsto Term deposit o National saving certificate(NSC) o Kisan vikas patra(KVP) o Indra vikas patra(IVP) o Life policies, staff loan- are exempted from NPA norms Treated as standard assets and provision of 0.25% should be made. In the case of loan issued under the back-end subsidy-scheme provision is to be made net of subsidy amount.

RECOVERY POLICY AT NDCC BANK

BANKS POLICY: At present they are making recovery but procedure for the same is not documented in the form of policy. Although the bank is committed to collection/recovery of its dues but the dignity of and respect for the customer is central to their recovery policy. The policy is framed on the principal of courtesy, fair treatment and persuasion.

GUIDELINES FOR BRANCH/RECOVERY STAFF:

All the branches of NDCC bank have to follow the following guidelines 1. Branch should continuously inform the borrower about the due date of repayment schedule. Recovery efforts should starts from the first month of default itself. 2. Position of overdue account to be reviewed on the monthly basis to arrest slippage of fresh accounts to NPA category.

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3. If the branch does not get response from the borrower for paying the amount, they have to visit the unit and meet with the borrower. During visit to customers place for collection of dues, decency and decorum would be maintained and customers privacy would be respected as far as practicable. 4. If the branch does not get any favorable response, during personal visit, they should write a notice letter to borrower. 5. If borrower still behaves irresponsible, they should meet the guarantor and ask guarantor to peruse the borrower. Guarantor must be informed about legal complication to arise if borrower fails to repay the dues. 6. On failure of all the recovery steps, branch to contact Area office/Control centre. 7. Area office/Control centre to call the borrower along with guarantor and try to find out the reason for overdue. If borrower is in genuine difficulty, problem should be resolved in a mutually acceptable and in an orderly manner. 8. If party behaves indifferent, legal actions must be initiated. In such case prompt legal action and seizure action should be taken. Preference to be given for steps under Securitization Act rather than go for filling a case in the court of Board of Nominees. 9. Reasonable notice would be given before Repossession of Security and its realization, unless the borrower is about to dispose of/remove the whole or any part of the security from the locality where it ordinarily remained or by whom it is used or caused to be remained or used, as the case may be, at the time of creation of security. 10. The aim of possession under Securitization or State co-op. Act will be to recover the dues and will not be aimed at whimsical deprivation of the property. The bank shall resort to repossession of the security only when the collection/recovery of dues is not forthcoming in spite of request made and the policy for repossession shall be in accordance with the terms and conditions of the loan documents and with in the legal framework. The policy should be fair and transparent in repossess, in valuation and realization of security.

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CHAPTER

ANALYSIS OF DATA

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Year wise npa at NDCC bank

YEAR 2007 Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL (RS. IN LACS) Amount 5912.67 91.90084 189.75 2.949291 316.69 4.922324 14.64 6433.75 %of Total

0.22755 100

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YEAR 2008 Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL

(RS. IN LACS) Amount 6923.74 143.60 291.00 10.84 7369.18 %of Total 93.95 1.95 3.95 0.15 100

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YEAR 2009 Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL

(RS. IN LACS) Amount 7266.63 156.65 278.40 1.04 7707.72 %of Total 94.28 2.03 3.61 0.01 100

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YEAR 2010 Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL

(RS. IN LACS) Amount 6867.81 12.24 213.58 0.00 7093.63 %of Total 96.82 0.17 3.01 0.00 100

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YEAR 2011 Details STANDARD ASSETS SUB-STANDARD ASSETS DOUBTFUL ASSETS LOSS ASSETS TOTAL

(RS. IN LACS) Amount 9801.49 120.12 258.80 159.85 10340.26 %of Total 94.78 1.16 2.50 1.54 100

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SEGMENT WISE CLASSIFICATION OF NPA

Segments 2005 No. of A/C Retail trade Small business 267 31 Amount Total NPA advances 752.63 17.69 46.48 4.38 2006 No. of A/C 248 25 Amount Total NPA advances 641.90 20.21 44.17 20.15 2007 No. of A/C 343 122 Amount Total advances 802.03 88.02 NPA 76.81 50.93

Small scale ind Construction & repairs Agriculture Small road & transportation Professional Education Other priority sector

582 246 2 10 84 2 0

4021.55 323.43 3.72 5.23 89.81 10.71 0.00 2454.16

210.74 642 21.02 0.00 0.00 5.00 0.00 0.00 231 0 0 2 8 55

3832.29 343.86 0.00 0.00 7.33 3041 41.82 2178.85

44.88 2.70 0.00 0.00 0.00 0.00 3.47

975 345 517 34 80 3 326

6323.86 459.76 115.64 8.18 72.52 7.26 68.05 2394.94

180.86 22.43 012 1.90 3.10 0.00 16.42 186.20

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Other non375 priority sector Total

177.26 285

134.41 310

1599 7707.72

436.09 1496 7093.63

225.82 3055 10340.26 538.77

RATIO ANALYSIS
To analyze the NPA situation in bank and from that to know about the banks credit appraisal system and level of risk in bank I have done the ratio analysis. Ratio analysis is the tool which will help us to do financial analysis of bank. Some names of ratio are as follows: 1. GROSS NPA RATIO. 2. NET NPA RATIO.

3. PROBLEM ASSETS RATIO. 4. SHAREHOLDERS RISK RATIO. Page14 5. PROVISION RATIO. 6. SUB-STANDARD ASSETS RATIO. 7. DOUBTFUL ASSETS RATIO. 8. LOSS ASSETS RATIO.

1. GROSS NPA RATIO Gross NPA is the sum of the total assets which are classified as the NPA by bank at the end of every year. Gross NPA is the ratio of Gross NPA to Gross Advances. It is expressed in percentage form. Gross NPA Ratio = Gross NPA Gross Advances * 100

Years 2007 2008 2009 2010 2011

Gross NPA 521.08 445.44 436.09 225.82 538.77

Gross advances (Rs. in lacs) 6433.75 7369.18 7707.72 7093.63 10340.26

Gross NPA ratio % 8.10% 6.04% 5.68% 3.18% 5.21%

ANALYSIS
Gross NPA ratio shows the banks credit appraisal policy. High Gross NPA ratio

means bank have liberal appraisal policy and vice-versa. In NDCC bank this ratio was 8.10% in March-2007 and it has been decreased from year 2007 to 2010 from 8.10% to 3.18%. But again in March-2011 this ratio reach at 5.21%. However it is revels from the chart that banks Gross NPA ratio is continuously decreasing which is positive trend for bank and we can say that bank have good appraisal system. 2. NET NPA RATIO The Net NPA Ratio is the ratio of net NPA to Net Advances. This ratio shows the degree of risk in banks portfolio. Net NPA ratio can be obtain by Gross NPA minus the NPA provisions divided by Net advances. Net NPA Ratio = Net NPA Net Advances *100

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Years 2007 2008 2009 2010 2011

Net NPA 299.13 0.00 0.00 0.00 0.00

Net advances (Rs. in lacs) 6211.80 6888.84 7236.74 6622.57 9733.62

Net NPA ratio % 4.82% 0.00% 0.00% 0.00% 0.00%

Net NPA=gross NPA provision for NPA Net advances=gross NPA provision for NPA ANALYSIS Net NPA ratio shows the degree of risk in portfolio of bank. High net NPA ratio means banks dont have enough fund to do provision against the Gross NPA. In NDCC Bank Net NPA ratio was 4.82% in year March-2007 which shows that in that year bank had not enough fund for provisions. But after that from March-2008 to March2011 Net NPA ratio is 0.00% which shows that bank has now enough provision capacity. So, here the degree of risk is less. NDCC bank has done more provision every year which is good at one side but at other side it also reduces the profit of bank.

When all bank will do provision then Net NPA will become zero but if we want to know the true and fair situation of bank we must consider the Gross NPA of bank. Page14

3. PROBLEM ASSETS RATIO This ratio is also known as the Gross NPA to Total Assets ratio. This ratio shows the percentage of risk on the total assets of the bank. High ratio means high risk for bank. Problem Problem Assets Ratio = Gross NPA Total Assets *100

Years

Gross NPA

Total assets (Rs. in lacs) 13381.91 15935.97 16337.35 18675.05 24202.77

Problem assets ratio % 3.89% 2.80% 2.69% 1.21% 2.23%

2007 2008 2009 2010 2011

521.08 445.44 436.09 225.82 538.77

ANALYSIS This ratio shows the percentage of risk on the assets of bank. It shows the level of risk on banks assets. High ratio shows the high risk on liquidity. In NDCC Bank this ratio was 3.89% in March-2007 and after that it has been decreased from 3.89% to 1.21% in March-2010. But again it increase to 2.23% in March- 2011. This ratio is continuously decreasing in bank except in March-2011. But overall this ratio is good for bank which indicates the level of risk is low in bank.

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4. SHAREHOLDERS RISK RATIO It is the ratio of Net NPA to Total capital and reserve of bank. Shareholders risk Ratio = Net NPA Total Capital & Reserves *100

Years

Net NPA

2007 2008 2009 2010 2011 ANALYSIS

299.13 0.00 0.00 0.00 0.00

Total capital & reserves (Rs. in lacs) 1793.76 2075.06 2262.39 2551.64 3014.58

Shareholders risk ratio % 16.68% 0.00% 0.00% 0.00% 0.00%

This ratio shows the degree of risk with share holders investment. High ratio means high ratio with the investment. In NDCC Bank this ratio was 16.68% in year March-2007 which shows that in that year risk on share holders investment was quite high but after that this ratio is 0.00% up to year March-2011, which shows that Bank have enough capacity for provision and the risk on investment is nil. As we know that this ratio is 0.00% show the risk is nil but on the other side because of more provision the profit will decrease and the shareholder will get less dividends.

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5. PROVISION RATIO Provisions are to be made against the Gross NPA of bank. As bank make provision for NPA it directly affects the profit of bank. This ratio shows the relation of total provision to Gross NPA. Provision Ratio = Total Provision Gross NPA *100

Years 2007 2008 2009 2010 2011

Total provision 221.95 480.34 470.98 471.06 606.64

Gross NPA (Rs. in lacs) 521.08 445.44 436.09 225.82 538.77

Provision ratio % 42.59% 107.83% 108.00% 208.59% 112.60%

ANALYSIS Provision ratio shows the degree of provision that is made against the Gross NPA of bank. As bank made the provision it directly affect the profit of bank and also the dividend payout ratio of bank too. If Provision ratio is less then it means that bank has make under provision and if provision is more then it means that it is over provision. In NDCC Bank they have made 42.59% provision in March-2007 which shows that it was under provision but after that in March-2008 and March-2009 it is 107.83% and 108% respectively which indicate that provision was nearer to total amount of Gross NPA but in March-2010 the provision ratio reach at 208.59% which indicate that it is the very over provision. And again in March-2011 it is 112.60% which is fair ratio.

NDCC bank should make the provision in the range of 100% to 115%. The provision in March-2010 which is 208.59% is very high and it is not necessary to do that. Page14

6. SUB-STANDARD ASSETS RATIO Sub-standard Assets Ratio = Total Sub-standard Assets Gross NPA *100

Years

Sub-standard assets

Gross NPA (Rs. in lacs) 521.08 445.44 436.06 225.82 538.77

Sub-standard assets ratio % 36.41% 32.24% 35.92% 5.42% 22.30%

2007 2008 2009 2010 2011

189.75 143.60 156.65 12.24 120.12

ANALYSIS This ratio shows the percentage of Sub-Standard assets in the Gross NPA of bank. High Sub-Standard ratio means more proportion of Sub-Standard asset in the Gross NPA. High ratio shows that there is a chance of recovery of assets is high. In NDCC bank this ratio was 36.41% in March-2007 which is good for bank and it is 5.42% in year March-2010 which is not good for bank. As the level of Sub-Standard assets are more the chances of recovery of NPA are high.

7. DOUBTFUL ASSETS RATIO It is the ratio of total doubtful assets to Gross NPA of the bank.

Doubtful Asset Ratio =

Total Doubtful Assets Gross NPA

*100

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Years

Total doubtful assets

Gross NPA (Rs. in lacs) 521.08 445.44 436.09 225.82 538.77

Doubtful assets ratio % 60.78% 65.33% 63.84% 94.58% 48.03%

2007 2008 2009 2010 2011 ANALYSIS

316.69 291.00 378.40 231.58 258.80

This ratio shows the percentage of Doubtful assets in the Gross NPA of bank. High Doubtful assets ratio means more proportion of Doubtful asset in the Gross NPA. More Doubtful assets means Bank should take action through recovery policy to reduce the level of Doubtful assets. As the Doubtful assets ratio is high which shows that bank should take quick action to reduce that level. This ratio should be less for the bank. In NDCC Bank this ratio is in between from 60.00% to 65.00% in year from March- 2007 to March-2009 but in March-2010 this ratio reach at 94.58% which indicate that bank must take some necessary action to recover it. And again in March-2011 this ratio decrease to 48.03% which is good for bank.

8. LOSS ASSETS RATIO It is the ratio of Total loss assets to Gross NPA of bank. Loss Assets Ratio = Total loss Assets Gross NPA *100

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Years 2007 2008 2009 2010 2011

Total loss assets 14.64 10.84 1.04 0.00 159.85

Gross NPA (Rs. in lacs) 521.08 445.44 436.09 225.82 538.77

loss assets ratio % 2.81% 2.43% 0.24% 0.00% 29.67%

ANALYSIS This ratio shows the percentage of loss assets in the Gross NPA of bank. High loss assets ratio means more proportion of loss asset in the Gross NPA. This should be less in bank. The high ratio indicates that bank has more fraudulent account and it is bad for bank. The bank must take necessary action to reduce the level of loss assets. In NDCC Bank this ratio is 2.81% in March-2007 and from it reach at 0.00% in the year March-2010. This ratio is decreasing in bank which is good for bank but again in March -2011 this ratio reaches at 29.67% which is the very high increase and it is very bad for bank Hence, bank should take some action to reduce the level of loss assets from the total NPA.

FINDINGS FROM RATIO:

From ratio I am able to find the following findings 1.The Gross NPA ratio of bank is 8.10% in the year 2007 after then it reaches to 5.21% in

the year 2011. Hence, the idle gross NPA ratio is 5.00% and bank have 5.21%. So, we can say that banks financial condition is good. Page14 2. Banks Net NPA ratio is 4.82% in the year 2007 and from 2008 to 2011 it remains 0.00% which is positive for bank. 3. The Problem assets ratio was 3.89% in the year 2007 which was the highest ratio and from that year it is decrease to 1.21% in the year 2010 which is good for bank. And this ratio is 2.23% in the year 2011. 4. Provision ratio for the year 2007 is 42.59% which show that there was under provision in that year but in year 2011 this ratio is 112.60% which shows that bank have enough profit for the provision. 5. It will be considered good if the Sub-standard assets ratio is high. For City bank this ratio is 36.41% in the year 2007 which is good but it reaches to 5.42% in the year 2010 which is very bad for banks health. 6. Doubtful assets ratio should be low for the good health of bank and in City bank this ratio is 94.58% in the year 2010 which is very bad but in year 2011 this ratio decrease to 48.03% which is positive for bank. 7. Loss assets ratio should be zero and bank have 0.00% in the year 2010 which is good but in year 2011 this ratio reaches to 29.67% which is very rapid change within one year. And it is also bad for bank.

CLASSIFICATION OF TOTAL NPA:

Years Sub-standard

2007

2008

189.76 143.60

2009 2010 (Rs. In lacs) 156.65 12.24

2011 120.12

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assets Doubtful assets Loss assets Total

316.69 291.00 14.64 10.84

278.40 1.04 436.09

213.58 0.00 225.82

258.80 159.85 538.77

521.09 445.44

P E R C E N T A G E
Years

CLASSIFICATION OF TOTAL ADVANCES

Years Total NPA Standard

2007 521.08 5912.67

2009 2010 (Rs. In lacs) 445.44 436.09 225.82 6923.74 7266.63 6867.81

2008

2011 538.77 9801.49

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assets Total advances

6433.75

7369.18

7707.72

7093.63

10340.26

Rs. In lacs

Years

CONCLUSIONS & SUGGESIONS

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CONCLUSION
Now, as we know that NON-PERFORMING ASSETS is like a black spot on diamond. They affect the profit of bank and also the financial health of bank. This NPA have number of effects on banks working. During my training in bank I gathered as much as possible information about NPA from bank and on the basis my experience I conclude the following points: NDCC banks NPA level is decreasing year by year which good for bank. In year 2011 NDCC bank own NPA is very low but because of merger with Baroda industrial co-op bank the level of NPA was increase. The Gross NPA ratio of bank is 8.10% in the year 2007 after then it reaches to 5.21% in the year 2011. Hence, the idle gross NPA ratio is 5.00% and bank have 5.21%. So, we can say that banks financial condition is good. Banks Net NPA ratio is 4.82% in the year 2007 and from 2008 to 2011 it remains 0.00% which is positive for bank. Loss assets ratio should be zero and bank have 0.00% in the year 2010 which is good but in year 2011 this ratio reaches to 29.67% which is very rapid change with in a one year. And it is also bad for bank. NDCC Bank has sound credit appraisal system and also sound recovery policy. NDCC Banks NPA level is decreasing year by year and because of that NDCC Bank is being considered a positive image in the minds of its customers. Hence in present time the position of NPA in bank is much better then the past position. In year 1997 in India the Gross NPA was 15.7% but now it is 3.00% in the year 2007. This is very favorable to Indian economy and also banking sector of India. Governments act and also the Narsimhan committee on NPA are very useful to reduce the level of NPA.

 So, I can conclude that level NPA in any bank is important parameter to analyze the health of bank. Page14

Suggestions:
1. NDCC banks NPA level is decreasing year by year which good for bank but bank should follow the recovery policy strictly. 2. In City Co. bank there is no any special recovery department so bank should develop the department for the fastest recovery of NPA. 3. Bank should motivate the staff to do fast recovery NPA. 4. Bank have more NPA in Small Scale Industry so, they should try to reduce that level of NPA.

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BIBLIOGRAPHY

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BIBILIOGRAPHY

JOURNALS Co-Operative Bankers Diary 2008 -by John Dsalve Annual Report of NDCC Co-Operative Bank -year, 2003, 2004,2005,2006,2007 Periodical circular and statement of RBI regarding to NPA managing and UCBs

WEBSITES http://finance.indiamart.com/investment_in_india/banking_in_india.html http://www.rbi.org.in/Home.aspx http://www.banknetindia.com/banking/cintro.htm http://www.investorwords.com/ http://www.indiabankassociation.com/